Developing Asia is expected to lose steam as trade rows between Washington and Beijing drastically damage supply chains for businesses, dragging down the region’s export-reliant economies, the Asian Development Bank (ADB) says.
The Manila-based institution has lowered its 2019 growth forecast for both China and developing Asian nations by 0.1 percentage points, citing major risks posed to international trade and global financial markets by the country’s ongoing trade dispute with the US. A tightening in global liquidity is expected to have a negative impact on business activity through a potential rise in borrowing costs and higher risks of capital outflows, according to the ADB.
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“Growth in the region has held up to external challenges, helped by strong domestic demand in China and India,” Yasuyuki Sawada, the chief economist at the development bank, said.
“The biggest risk to continued growth comes from the disruption of international production linkages caused by a further escalation of trade tensions, but Asia’s growth should remain resilient to the direct effects of the trade measures taken to date,” the analyst added.
The ADB’s forecasted growth of 5.8 percent would be the lowest for Asia and the Pacific since 2001, when it expanded 4.9 percent. The lender’s report, which doesn’t cover the latest tariffs imposed by China and the US on each other’s imports, includes detailed analysis of 45 countries in the region.
The Sino-American trade war, which was launched by Washington at the beginning of the year, continues to escalate, with more and more new tariffs being imposed. The latest tit-for-tat hikes aimed at $260 billion-worth of bilaterally traded goods came into force on Monday.
US President Donald Trump has accused Chinese companies of US intellectual property theft, saying that Beijing is unfairly subsidizing the corporations. China says Washington is engaging in “trade bullying.”
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